Opticians angry over threat of £10 'eyesight tax'

Opticians warned last night that the government is about to impose an "eyesight tax" on the dispensing of spectacles and contact lenses, including those for children.

The tax, which would add about £10 to the cost of every purchase, was not mentioned by the chancellor in his budget last week. It is to be levied from June after a judgment in the House of Lords with far-reaching implications for VAT law.

The Royal National Institute for Deaf People said it was told by Customs and Excise on Friday that the judgment was also likely to lead to VAT on the private dispensing of hearing aids.

A Customs spokesman told the Guardian that its move was limited to opticians, but an official told the RNID that the judgment would eventually affect other services.

This could add 10-15% to the price of the latest digital hearing aids that are not yet available on the NHS in most areas and retail for about £2,500.

The decision by Customs to move against the opticians followed years of argument about whether their dispensing services should be exempt from VAT.

The tax was imposed in 1988, but lifted in 1995 after the courts ruled that VAT should only be levied on frames and lenses - not the cost of the advice given to customers before they decided on their purchases.

Customs decided to reintroduce the tax after a recent House of Lords ruling in an apparently unrelated case about credit card protection services. The department said this redefined VAT law. The implication for opticians was that their dispensing services should be regarded as an essential part of their sale of spectacles and therefore taxable.

The Federation of Ophthalmic and Dispensing Opticians said it was seeking an urgent meeting with health ministers to overturn the decision by "irresponsible" Customs officials that could force the closure of opticians in areas and small towns threatening the availability of eye tests.

Bob Hughes, general secretary of the federation, said: "The VAT imposed would have to be passed on to patients. The current average cost for a pair of spectacles at £108.19 would need to increase by more than £10 for opticians to retain their current level of return. One result would be that the recent introduction of free eye examinations for those aged 60 and over would be mostly negated by the need to increase spectacle prices.

"For children and those on low incomes, it will become increasingly difficult to obtain corrective eyewear without paying a supplement on top of the current NHS vouchers."

A spokesman for Customs said opticians gained £275m in 1995 when the department repaid VAT that he been levied over the previous seven years. "We said they should pass that saving on to their customers. They refused. If they kept the money then, they should not pass on the tax to their customers this time," he said.

The RNID said the ruling would have a serious impact on 180,000 people who buy private hearing aids every year.

Although 88% of aids were provided free on the NHS, people in most parts of the country had to buy privately if they wanted the latest technology.

The price was already expensive. Nearly three quarters of the cost of a hearing aid went to pay for the work done by the audiologist dispensing it that until now has been exempt from VAT.

James Strachan, chief executive of RNID, said: "Far too many people, in desperation and often having to go into debt, buy hearing aids privately because of the inadequacies of the NHS. To add to this a 10-15% tax burden is astonishing. Any caring government would eliminate the effect of this decision as a priority."